The Dollar’s Invisible Power
Is BRICS Creating a New Global Financial Order?
BRICS Uncovered: A New Economic Force
The BRICS group, initially an acronym for fast-growing economies, has evolved into a formal forum for geopolitical coordination. In 2024, its expansion to include key energy and trade hubs like Saudi Arabia and the UAE represents a significant strategic leap, positioning the bloc as a major challenger to the established G7-led financial order.
BRICS+ Share of Global Population
Following its 2024 expansion, the BRICS+ alliance now represents approximately 45% of the world’s entire population.
Global GDP (PPP) Share: BRICS+ vs. G7
In terms of Purchasing Power Parity (PPP), the expanded BRICS bloc’s share of global GDP (around 36%) has already surpassed that of the G7 nations.
The Dollar’s Immutable Fortress
Despite challenges, the US Dollar’s dominance is not easily broken. Its strength is not just economic, but built on a deep foundation of unrivaled liquidity (via US Treasuries), a global network effect, and, most importantly, institutional trust in the U.S. Federal Reserve and its rule of law. This makes it the world’s “flight to safety” asset.
USD Share of Global Forex Trade
The dollar remains the financial *lingua franca*. According to the IMF, it is involved in over 80% of all foreign exchange transactions globally.
USD Share of Global Reserves
Central banks worldwide hold the majority of their savings in dollars. It accounts for nearly 60% of all allocated foreign reserves.
The Dedollarization Toolkit
BRICS is not attempting a direct replacement of the dollar, but rather building a network of alternatives to reduce dependence. This strategy involves creating new institutions, promoting bilateral trade in local currencies, and leveraging technology to bypass the dollar-centric system.
Strategy 1: Building Alternative Institutions
A key step was the creation of the New Development Bank (NDB) as an alternative to the IMF and World Bank. It prioritizes financing in local currencies, avoiding the political conditions often attached to Western loans.
Strategy 2: Gold Accumulation (Illustrative Trend)
Nations like China and Russia have aggressively increased their gold reserves. Gold is seen as the ultimate “anti-currency,” a hard asset with no credit risk or political counterparty, acting as a hedge against dollar dependence.
Strategy 3: Bypassing the System (HTML Diagram)
The ultimate goal is to avoid the dollar “toll.” New systems like Central Bank Digital Currencies (CBDCs) and direct bilateral trade agreements allow nations to settle payments without ever touching the US-controlled SWIFT system.
Traditional Path (Dollar-Dependent)
Trade: China <> Brazil
Convert Real to USD
US SWIFT System
Convert USD to Yuan
Alternative Path (Dedollarized)
Trade: China <> Brazil
Direct Settlement
(via Bilateral Swap Line OR CBDC Network)
Cracks in the BRICS Foundation
While the bloc projects unity, it faces significant internal challenges. The group is a “coalition of the discontented,” united more by a shared desire to reduce US power than by a single unified vision. This mutual distrust is the biggest brake on progress.
- The Leadership Dilemma: No country wants to replace a dependence on the US dollar with a new dependence on the Chinese Yuan.
- Geopolitical Rivalry: Deep-seated border rivalries and economic competition, particularly between India and China, prevent true financial integration.
- Institutional Trust Deficit: A reserve currency requires transparent, independent institutions and a predictable rule of law—qualities the US (via the FED) provides, but which are lacking in a bloc containing strictly controlled economies.
The Geopolitical Catalyst
The “weaponization” of the dollar—specifically the 2022 decision to freeze Russia’s foreign currency reserves—was an inflection point. It sent a clear message to all central banks: your dollar assets are only safe as long as you align with US foreign policy. This forced even US allies to seek “geopolitical insurance” through diversification.
The Great Paradox: US Debt
A common argument for the dollar’s fall is the massive US national debt. Paradoxically, this debt (in the form of US Treasuries) is also the source of its strength. It is the largest, most liquid “safe asset” in the world, making the dollar “too big to fail” on a global scale.
Conclusion: A Multipolar, Not Post-Dollar, Future
The BRICS challenge is real, but it will not replace the dollar tomorrow. The dollar’s moat of liquidity and institutional trust is too deep. Instead, we are entering a **multipolar** financial world. The dollar will remain the dominant force in finance and reserves, but its share will slowly erode as a more fragmented system emerges, with the Euro, Yuan, and other local currencies carving out larger roles in regional trade and commodity settlements.